In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Firehouse Subs franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Firehouse Subs franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Firehouse Subs franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Firehouse Subs outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Firehouse Subs’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average, median, high, and low unit weekly sales volume for the 32 company-owned traditional, 1,005 franchised traditional, 17 franchised free-standing with drive-thru, and 26 franchised end-cap center with drive-thru Firehouse Subs Restaurants that were open during the company’s fiscal year 2017

• 2017 average food sales, discounts, employee meals, total revenue, food costs, paper costs, total cost of sales, gross profit, wages and benefits, health insurance, marketing expenses, telephone and utilities, professional fees, rent and occupancy expenses, other operating expenses, royalty, total operating expenses, and EBITDA from operations for 32 Firehouse Subs Restaurants operated by the company’s affiliates, grouped according to weekly average unit volume (> $17,000; $14,000 to $17,000; $11,000 to $14,000; $8,000 to $11,000; and $0 to $8,000)

Section I – Background Information

16 Things You Need to Know About the Firehouse Subs Franchise

Continues Non-Traditional Growth

1.  Around mid-April 2018, Firehouse Subs announced the opening of its newest location on the campus of Western New England University in Springfield, Massachusetts. With the new college location, Firehouse Subs continues its innovative brand growth and development, building upon the openings of two airport terminal locations in 2017.

2.  Greg Delks, vice president of global and non-traditional development for Firehouse Subs, said, “We’re thrilled to introduce our award-winning food and authentic firefighter heritage to the students, faculty and staff of Western New England University. As our first venture with a higher university service provider, this opening is an important milestone in our brand’s development as it continues an impressive period of expansion into an ever-changing and growing segment of our industry.”

3.  The Western New England University restaurant is the latest of several non-traditional locations Firehouse Subs expects to open over the next five years. Open seven days a week, the restaurant offers a modified version of the brand’s classic menu of specialty steamed subs and is available to students using the university’s dining plan.

Revamps To-Go Food Experience

4.  Like many quick service restaurant brands in America, Firehouse Subs has seen an increase in take-out orders in recent years. According to Firehouse Subs, this latest trend has been frustrating because of the brand’s signature steamed meats and cheeses. Firehouse Subs CEO Don Fox said, “It’s just that it wasn’t as good as what we were serving in the dining room. In the dining room we don’t package the food at all. We serve the food plated in a basket. Great visual appearance. Every sandwich made and heated to order. That’s the ideal serving condition.”

5.  Around 2016, Firehouse Subs decided it was finally time to bridge the to-go gap and over the summer of 2017, the brand completed its rollout of a new system-wide packaging lineup. It consists of three bagasse containers, which is a 100 percent compostable, eco-friendly material made from the fiber mass of sugarcane. There’s one for Firehouse Subs’ new smaller subs (which launched in early 2017), one for medium sandwiches, and a container ideal for large orders. The containers are also microwaveable and heat tolerant up to 212 degrees, designed to handle hot food, grease, and be cut resistant.

6.  The new take out packaging is made from the same material as the packaging that Firehouse Subs has been using for its meatball sub. However, unlike the updated meatball packaging, this system-wide switch took a lot of planning and time. Fox said Firehouse Subs had to find a manufacturer who could produce the vast quantity the growing chain needed. It required tooling at the plants and ramp-up time.

7.  He added, “The manufacturing capacity out in the packaging universe was fairly limited. The logistical challenges were a little different because the cube size for shipping was a lot different than the wraps. It does add cost to the PNL but we feel it’s well worth the investment on the PNL to improve the guest experience on the off-premise consumption.”

8.  Firehouse Subs knew, from customer feedback, that there was a marked difference in guest satisfaction between in-house diners and those who took subs to go. At the time of the launch of the new packaging, Firehouse decided to initially rely on word-of-mouth to spread the news of the updated to-go containers. Fox said the brand was still developing the rest of its marketing strategy to promote the better take out boxes.

9.  “It’s great rolling something out and the day that it hits the restaurant you’re getting benefit from it by virtue of the improved customer experience,” Fox said. “But the real goal is to capture back guests who may have ruled us out for to-go business in the past. Again, loved us for dine-in but ruled us out. So they’ve got to be told that there’s a change. They’re not going to stumble into it.”

Releases Reinvented Version of Classic Reuben Sandwich

10.  Firehouse Subs keeps its menu fresh with the release of new limited-time items throughout the year. Its latest offering, the Pastrami Reuben, was launched in early April 2018 and is currently available for a limited time at all U.S. Firehouse Subs locations. In addition to U.S. Firehouse Subs restaurants, the Pastrami Reuben is also available in Canada for a limited time beginning on May 14.

11.  Firehouse Subs’ reinvented version of the deli classic is stacked high with USDA Choice Pastrami, paired with melted Swiss, and finished with a sweet and tangy coleslaw, Thousand Island dressing, and mayo, served hot atop Firehouse Subs’ signature toasted sub roll.

12.  According to Jay Miller, director of product development for Firehouse Subs, “Guests know and love us for our hot specialty subs, and we’re excited to introduce a new item that inventively combines classic flavors to create a sub that’s truly unique to our brand. The Pastrami Reuben is an innovative step forward in our mission to provide an enticing new menu experience for guests, while keeping our commitment to quality.”

Company History

13.  Firehouse Subs was founded in 1994 by brothers Chris and Robin Sorensen in Jacksonville, Florida. The Sorensen brothers were firefighters who came from a family of firefighters and named their new business venture after their previous career. A year after opening the first Firehouse Subs restaurant, the Sorensens attempted to franchise the concept but eventually decided to buy back those franchised locations. They chose to focus on operating company-owned stores only, primarily in the Jacksonville area.

14.  By the end of the 1990s, the Sorensens had 10 Firehouse Subs restaurants and they opened their first location outside of Florida. Around the early 2000s, the Sorensens decided to give franchising another try after using consultants to plan franchise growth. The second wave of franchising began in 2001 and by 2003, there were 100 Firehouse Subs locations in the United States.

15.  Over the next decade, Firehouse Subs pushed national expansion, and in 2016 the chain opened its 1,000th location. Around 2011, Firehouse Subs opened its first international location in Puerto Rico, and today there are restaurants in Canada and Mexico as well.

Entrepreneur’s Franchise 500

16.  Firehouse Sub ranked No. 39 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Firehouse Subs franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Firehouse Subs’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  818
• Outlets at the End of the Year:  912
• Net Change:  +94

2016

• Outlets at the Start of the Year:  912
• Outlets at the End of the Year:  1,005
• Net Change:  +93

2017

• Outlets at the Start of the Year:  1,005
• Outlets at the End of the Year:  1,054
• Net Change:  +48

Company-Owned

2015

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  32
• Net Change:  0

2016

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  32
• Net Change:  0

2017

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  37
• Net Change:  +5

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

Part 1 – Firehouse Subs’ Historical Average Unit Volume for Company-Owned and Franchised Locations

• The following charts show historical sales information regarding both franchised and affiliated Firehouse Subs Restaurants that were open during the company’s fiscal year 2017.

• This historical sales information was compiled using the reports provided to Firehouse Subs by these Restaurants. The reports are provided to Firehouse Subs on a cash accounting basis and are used to form the basis of royalty payments to the franchisor.

• The franchisor does not directly operate any Restaurants; all company-owned Restaurants are operated by affiliates, which are owned and controlled by the franchisor’s parent – FRG.

• The characteristics of those Restaurants are not materially different from the franchises the franchisor offers for sale, except that:  they may incur greater marketing and promotional expenses (as a sponsor of Jacksonville Jaguars and other programs); and incur additional expenses to offer health insurance to all full-time employees.

• Average Unit Weekly Sales Volume is weighted based on the number of operating weeks for each Restaurant.

• The sales information provided is unaudited.

• This sales summary does not reflect any expenses of Firehouse Subs Restaurants. Some of the expenses that are not reflected in this summary, but that you will incur and should take into consideration, are the following:

• franchise payments, including royalties;
• salaries, payroll taxes, and other employee benefits;
• licenses;
• rent and utilities;
• cost of equipment;
• cost of food and other product costs;
• financing costs (in addition to occupancy expense);
• accounting and legal expenses;
• debt repayment.

• These expenses will affect the net income and cash flow of a Firehouse Subs Restaurant. You should consider them and evaluate their impact on your operations.

2017 Weekly Average Unit Volume (Company-Owned Traditional)

$17,000+